FOR the past 10 years, Asia has been the highest contributor to cumulative growth in global high net worth wealth.
At 35% contribution, it overshadows Latin America (24%), Europe (18%) and North America (17%).
Based on a report on Asian Private Banking: Today's Boiling Frog? by Singapore-based AT Kearney and Newtone Associates, these figures indicate the strong potential for the industry for which penetration rate in Asia is still low.
With the rising level of entrepreneurial wealth in Asia, it may be timely for these investors to note some of the recommendations and ask additional questions to the private banker of their choice.
They should not be taken by superficial “feel good” offerings.
In their report, Sean Choo and Michael Chaille cautioned against opportunistic growth which they say characterises Asian private banks today; as well as concierge-style and red carpet type of services.
Instead, the private bank of their choice should be assessed from certain aspects such as sustainability, value systems that would provide a framework for long-term strategy, client segmentation and indepth expertise in product and service offerings.
The report, based on 30 interviews with private banks in Asia and Europe, also highlighted the importance of cost-efficiency and value-creation.
Cost-efficiency, especially from outsourcing and review of compensation packages, will help to ensure sustained profitability.
In fact, the findings reveal that the average cost-to-income at private banks in Asia has gone to as high as 80%; hence, the analogy of the boiling frog that will find it hard to leap out of danger.
In terms of value creation, the report recommends that private banks need to deliver “true value added products and services with concrete performance implications.” It advises against the current “opaque product pricing model” where the cost of their services is implicitly bundled; instead, there should be a more transparent pricing structure that is linked to performance.
Private banks whether they are large, universal; standalone or regional/domestic have more to gain by initiating revolutionary rather than evolutionary change.
The urgency is obvious as there are attractive opportunities for wealth managers in Asia.
By nature of their entrepreneurial spirit, Asia's wealthy possess higher appetite for risk.
An estimated 80% of the region's wealth is still untapped by wealth managers.
Aggregate wealth in Asia is at the cusp of being transferred from first to second generation.
The maturing customer base is familiar with private bank offerings.
Fundamental changes involve steering away from a focus on purely topline growth and increase in assets under management.
There needs to be an overhaul of short-term objectives toward long-term, sustained strategies.